SPRINGFIELD, Ill. — Facing a lawsuit over deceptive mortgage practices, a Bank of America Corp. subsidiary has agreed to modify tens of thousands of loans to keep people in 11 states from losing their homes, the Illinois attorney general's office said Sunday.

Borrowers stuck with Countrywide Financial mortgages that they can't afford could see their interest rates reduced or have the loan principal cut. Some might qualify for having to pay nothing but interest for a decade. Even people who can't afford to keep their homes with such changes will be able to get help moving to a new home.

"This is going to provide a tremendous amount of relief," said Illinois Attorney General Lisa Madigan.

Her office and officials from California negotiated the settlement. Nine other states have also joined the settlement, and other states could sign on, said Deborah Hagan, chief of Madigan's Consumer Protection Division.

Texas Attorney General Greg Abbott Monday said the settlement means about 30,000 Texas homeowners will qualify for the loan modification program. Borrowers will not be charged late fees, loan modification fees, foreclosure fees or pre-payment penalties.

If all 50 states were to join, the settlement could provide $8.7 billion in relief to 400,000 borrowers, Hagan said.

In California alone, the settlement will offer $3.5 billion in relief. For Illinois, that would translate to $190 million. The total for the 11 states was not immediately available.

The settlement applies to people who obtained their mortgages through Countrywide Financial Corp., which Charlotte, N.C.-based Bank of America purchased in June, at the same time Illinois and California sued the company.

"Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," California Attorney General Jerry Brown Jr. said in a statement Sunday.

The other states joining the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.

Bank of America will launch the new mortgage aid program in December, said Barbara Desoer, president of Bank of America's mortgage, home equity and insurance services. In a statement, she called it "a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership."

The mortgage aid includes revising customers' payments so they don't exceed 34 percent of income. Other options include reducing interest rates and adjusting principal so that borrowers don't wind up actually losing equity under some payment plans.

Countrywide will not charge loan modification fees and will waive prepayment penalties.

Madigan said she hopes the settlement could serve as a model for steps that other lenders could take to make up for misleading mortgage practices. She stressed that the agreement involves no tax money but will help people keep their homes and keep money flowing to lenders

"This settlement will help homeowners stay in their homes, which ultimately helps investors and also helps communities," said Madigan, a Chicago Democrat.